Public Provident Fund Calculation for Rs 1 crore; PPF (Public Provident Fund) is a popular investment choice. PPF deposits offer not just income tax advantages, but also tax-free interest and final maturity amounts. However, not all investors are aware of how interest on PPF investments is computed.
An investor can collect Rs 1 crore or much more through PPF over a lengthy period. However, to save this much money, you must understand when the optimum time to invest is, whether a lump sum or monthly investment is better, and how interest is calculated on your savings.
The government has set the PPF interest rate at 7.1 percent since last year. The government announced a substantial drop in interest rates for modest savings programs, including PPF, on March 30, 2020. The interest earned on a PPF balance is computed monthly. However, it is only credited to the subscriber’s account after the fiscal year (March 31).
The minimum balance in the PPF account between the fifth and the end of each month is used in the computation. This implies that if a subscriber contributes after the 5th day of the month, he will get interested in the sum from the previous month. If you invest before the 5th day of the month, however, you will get interested in both the current month’s amount and the prior month’s amount. If you want to attain your Rs 1 crore PPF target quickly, consider putting money in the account before the 5th day of the month.
Let’s see how much you’ll need to invest each month to acquire Rs 1 crore in a PPF account.
If you invest Rs 1.5 lakh per year at the current 7.1 percent interest rate, your PPF account will have a corpus of about Rs 40 lakh after 15 years (or Rs 12,500 per month in the PPF account.) This is assuming that the interest rate stays the same over the next 15 years. It’s worth noting that the government adjusts the PPF interest rate regularly. As a result, the PPF interest rate may fluctuate over the investment period.
Note: In a year, a maximum of Rs 1.5 lakh and a minimum of Rs 500 can be invested in a PPF account.
You can extend your PPF account for a total of 5 years, according to the Public Provident Fund Scheme 2019 guidelines. You’ll have to keep extending your account to acquire Rs 1 crore. So, if you prolong your account for five years after the 15-year maturity term, your corpus after 20 years will be roughly Rs 66 lakh (assuming 7.1 percent interest). After 25 years, if you prolong your account for another 5 years, you would receive roughly Rs 1 crore.